How Sensitive is Newmont’s Valuation To The Changes In The Price of Gold?
Gold has had a strong start to 2018 largely as a result of the weakening of the U.S. dollar which makes the precious metal relatively cheaper to its investors. Gold had risen by almost 5% during its peak in January and the market is extremely optimistic regarding the rise in the price of gold throughout 2018. Such a scenario remains extremely beneficial for gold mining companies, such as Newmont Mining (NYSE: NEM), which had previously suffered from an environment of declining gold prices. We have created an interactive model which highlights the impact of a rise in gold prices on the company’s stock price.
The graph below outlines the implication of a 1% change in the average realized price for gold on the company’s stock price, assuming that shipment volume for the upcoming year stays constant. Per our analysis, we derive that a 1% growth in the company’s average realized price for gold results in a 1% upside to the current market price of the company. Thus, if gold happens to average at $1400 for the full year 2018, it would imply an 11% upside to the current stock level.
The earnings and P/E multiples are based on the consensus estimates from Reuters for 2018 and the model assumes that the forward P/E for the company remains constant.
In case you have alternate assumptions regarding estimated revenue, net income margin, or P/E multiple figures, you can modify the same using our interactive platform to arrive at your own impact on the company’s valuation.
Have more questions about Newmont Mining? See the links below.
- Here’s How the U.S. Tax Reform is Impacting Newmont Mining
- Does It Make Sense For Newmont To Increase Its Gold Output In An Unfavorable Environment For Gold?
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